California’s tiered water pricing has to be based on delivery costs rather than conservation incentives, a state appeals court ruled. The verdict will have major implications on California’s efforts to conserve water amidst its unprecedented drought.

The much-anticipated decision saw the Fourth District Court of
Appeals overturn the pricing system in San Juan Capistrano, a
city of 35,000 in California’s affluent Orange County. It said it
violated a 1996 amendment to the state constitution, known as
Proposition 218.

“We do hold that above-cost-of-service pricing for tiers of
water service is not allowed by Proposition 218 and in this case,
[the city] did not carry its burden of proving its higher tiers
reflected its costs of service,” said the judges William
Bedsworth, Eileen Moore and David Thompson.

The city’s water pricing system charged customers who used small
quantities of water, a lower rate than customers who used larger
quantities. According to the Orange County Register, aerospace executive
Jim Reardon and former school administrator John Perry filed a
lawsuit challenging the pricing in 2012, claiming that the scheme
was implemented to recoup the costs of the city’s expensive
groundwater recovery plant. Perry withdrew from the case after
being appointed to the city council in February 2015.

The judges did say that tiered prices are legal, so long as the
government agency could show that the rates were tied to the cost
of providing the water. In regards to San Juan Capistrano, they
said, this was simply not the case. The city’s water agency
“merely allocated all its costs among the price tier levels,
based not on costs, but on predetermined usage budgets.”

According to the Los Angeles Times, 66 to 80 percent of
California water providers use some type of tiered pricing
system. A 2014 University of California Riverside study estimated
that tiered rate structures reduced water use by up to 15
percent.

Earlier this month, California Governor Jerry Brown (D) ordered a
25 percent reduction in water usage by the end of the year. It
was the first mandate to conserve water in the state’s history,
prompted by a fourth year of an unprecedented drought.

A 2014 study by scientists at the Woods Hole Oceanographic
Institute and the University of Minnesota concluded that the
current drought was the worst in the past 1,200 years, using used
tree rings to reconstruct the Golden State’s temperature and
precipitation history since the 9th century. Other scientists
have urged
water rationing, warning that the state may not have more than a
year’s worth of water left.

The appeals court judges noted that they were aware of the dire
situation, making a reference to a 1986 book about the water woes
of the American west.

“We hope there are future scientists, engineers, and
legislators with the wisdom to envision and enact water plans to
keep our beloved Cadillac Desert habitable,” the ruling
reads. “But that is not the court's mandate. Our job, and it
is daunting enough, is solely to determine what water plans the
voters and legislators of the past have put in place, and to
determine whether the trial court’s rulings complied with those
plans.”